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Today's Headlines Inflation
Indonesia experienced 0.07 percent deflation on a monthly basis in August 2017 according to the latest data from Indonesia's Statistics Agency (BPS). The result is in line with expectations as inflationary pressures tend to ease in Indonesia after the Ramadan and Idul Fitri celebrations in the June-July period. On an annual basis, Indonesian inflation eased to 3.82 percent in August.
Indonesia's inflation was recorded at 0.22 percent month-on-month (m/m) in July 2017. On Tuesday morning (01/08) Indonesia's Statistics Agency (BPS) said July inflation was attributed to rising prices in most expenditure group indices, but particularly foodstuffs (+0.21 percent), processed food, beverages, cigarettes and tobacco (+0.57 percent), housing, water, electricity, gas and fuel (+0.06 percent), clothing (+0.06 percent), health (+0.15 percent), and education, recreation and sports (+0.62 percent).
Indonesia's inflation rate in June 2017 was higher than previously estimated. The nation's Statistics Agency (BPS) announced on Monday morning (03/07) that monthly inflation was recorded at 0.69 percent last month, while estimates ranged between 0.50 - 0.60 percent (m/m). Traditionally, Indonesian inflation tends to be high in June as people's consumption rises amid the Ramadan and Idul Fitri festivities.
Inflation is expected to have remained high in Indonesia in June 2017 amid the Ramadan and Idul Fitri celebrations, a period when increased consumption (especially consumption of food products) always triggers inflationary pressures in Southeast Asia's largest economy. Monthly inflation is estimated to reach around 0.50 percent in June. On Monday (03/07) Indonesia's Statistics Agency (BPS) will release the nation's official inflation figures.
Indonesia's 10-year government bond yields are currently around 6.89 percent, or the highest among Asian nations. On the one hand, this makes Indonesian bonds attractive to investors but on the other hand it becomes more costly for the government. How come Indonesian bond yields remain high?
The central bank of Indonesia (Bank Indonesia) expects Indonesia's inflation rate to rise to 4.36 percent year-on-year (y/y) by the end of 2017, a significant jump compared to the 3.02 percent (y/y) inflation rate in 2016 but still within the initial target range of Bank Indonesia (that is set at a wide range of 3 - 5 percent y/y). According to the latest data from Indonesia's Statistics Agency (BPS), Indonesia's annual inflation rate rose to 4.33 percent (y/y) in May, up from 4.17 percent (y/y) in the preceding month.
Inflation continued to rise in Indonesia in May 2017 but at a slower pace than expected. According to the latest data from Indonesia's Statistics Agency (BPS), the annual inflation rate rose to 4.33 percent (y/y) in May, up from 4.17 percent (y/y) in the preceding month. The May inflation figure is the highest in 14 months. On a monthly basis Indonesian inflation was recorded at 0.39 percent (m/m) in May 2017.
The central bank of Indonesia (Bank Indonesia) expects the nation's May 2017 inflation rate to be relatively high at 0.37 percent month-on-month (m/m) due to rising food prices and transportation tariffs ahead of the start of the holy Ramadan month (the Islamic fasting month). A Bank Indonesia survey shows inflation had climbed 0.27 percent in the first three weeks of May. As the Ramadan has started in the fourth week, inflationary pressures should rise sharper in these last couple of days of the month.
Indonesia's Statistics Agency (BPS) announced the nation's April 2017 inflation figure was recorded at 0.09 percent month-on-month (m/m), a relatively high inflation figure for Southeast Asia's largest economy considering the month of April usually brings deflation to Indonesia due to the peak of the harvest season (which causes sliding food prices).
Indonesia's inflation rate eased more than analysts had forecast in March 2017. Based on the latest data from Indonesia's Statistics Agency (BPS), Indonesian inflation fell to an annual rate of 3.61 percent (y/y) on the back of a monthly deflation rate of 0.02 percent in March 2017. The outcome also surprised Indonesia's central bank (Bank Indonesia). Up to the third week of March a Bank Indonesia survey showed inflation reached 0.05 percent.
Latest Columns Inflation
In 2014, Indonesia is expected to see capital inflow of between USD $1 billion and USD $1.5 billion of funds for investments in the country's car components industry. About 20 to 30 companies are eager to expand or start business in this sector of Southeast Asia's largest economy (each investing about USD $50 million). Indonesia's car industry is attractive due to record high car sales in recent years (triggered by strong domestic GDP per capita growth) as well as double-digit export growth (although coming from a low base).
ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the December 2013 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the current account deficit, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:
Today, Bank Indonesia kept its benchmark interest rate (BI rate) at 7.50 percent at the Board of Governors’ meeting. The lending facility rate and deposit facility rate were maintained at 7.50 percent and 5.75 percent respectively. An assessment of the economy in 2013 and outlook for 2014-2015 indicated that such policy is consistent with ongoing efforts to keep inflation within the target of 4.5±1 percent in 2014 and 4±1 percent in 2015, as well as to help reduce the current account deficit to a sustainable level.
Domestic sales of motorcycles in Indonesia are expected to have fallen by 20 percent to 550,000 in December 2013 compared to the previous month (688,527). According to the Chairman of the commercial department of the Indonesian Motorcycle Industry Association (AISI), Sigit Kumala, this decline is not the result of slowing demand for motorcycles but due to the limited amount of working days amid the Christmas and New Year holidays. This then led to less production and distribution of motorcycles to Indonesian dealers.
Again positive news for Indonesia's trade balance. Last week, Statistics Indonesia announced that the largest economy of Southeast Asia posted a USD $776.8 million trade surplus in November 2013 (the largest monthly trade surplus since March 2012). After the (revised) USD $24 million trade surplus in October 2013, November was the second straight month in which the country posted a surplus. This development is important to gain investors' confidence as Indonesia's current account deficit has been a major cause for concern.
As we approach the end of 2013 it is worth taking a look back to the performance of the stock market of Indonesia this year. At the start of the year, investors and analysts were positive that the country's benchmark stock index (known as the IHSG or Jakarta Composite Index) would post steady growth. Initial forecasts claimed that the IHSG could surpass the 5,000 points level by the end of 2013 from 4,300 at end-2012. The actual performance of the IHSG in fact exceeded expectations as in May 2013 the index moved beyond 5,200 points.
On Thursday 12 December 2013, Indonesia's central bank (Bank Indonesia) announced that the country's benchmark interest rate (BI rate) remains unchanged at the level of 7.50 percent in December 2013. This announcement was a bit surprizing as about 80 percent of analysts expected Bank Indonesia to raise the BI rate in order to support the depreciating Indonesia rupiah exchange rate. Starting the year at IDR 9,670 per US dollar, the rupiah has fallen around 25 percent to IDR 12,081 per US dollar.
In Bank Indonesia's board of governors' meeting, which was held on Thursday (12/12), it was decided to maintain the country's benchmark interest rate (BI rate) at 7.50 percent. This decision was in line with market expectation but was unable to support the Jakarta Composite Index and rupiah exchange rate. The lending facility and deposit facility interest rates were also maintained at 7.50 percent and 5.75 percent respectively. Bank Indonesia decided not to change the rate as Indonesia's inflation outlook for 2014 is still within target.
Rudi Wahyono, Executive Director of the Indonesian Center for Information and Development Studies (Cides), believes that Indonesia's economic expansion in 2014 will be divided in two stages: before and after the legislative and presidential elections. Before the 2014 elections, Wahyono expects that economic growth will be slightly lower at 5.7 percent compared to the period after the elections when growth is expected to hit 6 percent. Growth in the first half of 2014 will be less strong as investors are waiting for the election results.
ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the November 2013 edition, a number of important issues that are monitored include Indonesia's inflation rate, the trade balance, the current account deficit, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:
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